Semiconductor Manufacturing International Corporation (SMI) announced its consolidated results of operations for the

three months ended September 30, 2005. Sales increased 10.9% in the third quarter of 2005 to US$310.0 million from US$279.5 million in the prior quarter.

The company reported an increase in capacity to 143,188 8-inch equivalent wafers per month and an increase in utilization rate to 92% in the third quarter of 2005 compared to 82% in the second quarter of 2005.

Gross margins were 8.2% in the third quarter of 2005 compared to 2.3% in the second quarter of 2005. Net loss decreased to US$26.1 million in the third quarter of 2005 compared to a net loss of US$40.4 million in the second quarter of 2005.

Cost of sales increased to US$284.7 million in 3Q05, up 4.2% QoQ from US$273.1 million in 2Q05, primarily due to an increase in wafer shipments, an inventory write-down as a result of declining estimated market values, and royalty payments for licensed products.

Gross profit increased to US$25.3 million in 3Q05, up 295.6% QoQ from US$6.4 million in 2Q05 and down 65.7% YoY from US$73.8 million in 3Q04.

Gross margins increased to 8.2% in 3Q05 from 2.3% in 2Q05, primarily due to a higher blended ASP.

R&D expenses increased to US$19.2 million in 3Q05, up 17.7% QoQ from US$16.3 million in 2Q05, primarily due to 90nm research and development activities and non-recurring start-up costs associated with Fab 6 (Beijing).

G&A expenses increased to US$9.1 million in 3Q05, up 69.0% QoQ from US$5.4 million in 2Q05, primarily due to a foreign exchange loss of US$0.3 million in 3Q05 compared to a foreign exchange gain of US$2.5 million in 2Q05.

Selling & marketing expenses increased to US$4.1 million in 3Q05, up 35.2% QoQ from US$3.0 million in 2Q05, primarily due to the increase in engineering material expenses associated with selling activities. Amortization of acquired intangible assets representing amortization expenses associated with the acquisition of intangible assets, increased to US$10.7 million in 3Q05, up 5.7% QoQ from US$10.1 million in 2Q05.

Loss from operations decreased to a loss of US$20.9 million in 3Q05 from a loss of US$32.1 million in 2Q05.

Other non-operating loss decreased to US$5.6 million in 3Q05, down 32.0% QoQ from a loss of US$8.2 million in 2Q05 primarily due to the foreign exchange gain of US$1.2 million relating to non-operating activities in 3Q05 compared to the foreign exchange loss of US$1.6 million relating to non-operating activities in 2Q05.

Interest expenses increased to US$10.3 million in 3Q05, up 15.2% QoQ from US$9.0 million in 2Q05, primarily due to the increase in bank borrowings and higher interest rates.

Net foreign exchange gain of US$0.9 million based on a foreign exchange loss of US$0.3 million in G&A and a foreign exchange gain of US$1.2 million relating to non-operating activities resulting from financing or investment transactions (i.e. forward contracts) classified as other income (expenses).

Net loss decreased to US$26.1 million in 3Q05, down 35.4% QoQ from a net loss of US$40.4 million in 2Q05.

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